Opinion
Case No. 3:17-bk-698-PMG Adv. No. 3:17-ap-62-PMG
02-21-2018
In re: Iryna Hrachova, Debtor. Iryna Hrachova, Plaintiff, v. Woodland Villages Master Homeowners Association, Inc., and Magnolia Garden Villas Association, Inc., Defendants.
Chapter 13
ORDER ON PLAINTIFF'S MOTION FOR FINAL SUMMARY JUDGMENT
THIS CASE came before the Court for hearing to consider the Plaintiff's Motion for Summary Judgment in this adversary proceeding. (Doc. 12).
The Debtor, Iryna Hrachova, commenced the proceeding by filing a Complaint against Woodland Villages Master Homeowners Association, Inc. (the HOA) and Magnolia Garden Villas Association, Inc. In the Complaint, the Debtor primarily seeks to void the Defendants' liens against her residential real property pursuant to §506 and §544 of the Bankruptcy Code.
Generally, a homeowners' association's lien against a debtor's principal residence can be stripped in a Chapter 13 case if the amount of a senior mortgage exceeds the value of the residential property.
In this case, the Debtor claims certain Property located in Ocala, Florida as her residence. The Property is encumbered by a separate entity's "first priority" mortgage that exceeds the Property's value. Consequently, the HOA's junior lien is a wholly unsecured lien that may be stripped in the Debtor's Chapter 13 case pursuant to §506 and §1322 of the Bankruptcy Code.
Background
On September 6, 2006, the Debtor acquired certain real property located at 2503 SE 18th Cir., Ocala, Florida (the Property). (Complaint, Exhibit A).
On the same date, September 6, 2006, the Debtor signed a Note payable to Wachovia Mortgage Corporation in the original principal amount of $147,350.00. The Note was secured by a Mortgage on the Property. (Claim Number 3-1).
Deutsche Bank Trust Company Americas as Trustee (the Bank) asserts that Wachovia Mortgage Corporation assigned the Mortgage to the Bank on March 30, 2010. (Claim Number 3-1).
On June 9, 2010, the Bank filed an action to foreclose the Mortgage in the Circuit Court for Marion County, Florida. (Main Case, Doc. 87, Exhibit B).
On July 27, 2011, the HOA filed a Claim of Lien against the Property for unpaid homeowner's assessments. (Claim Number 1-1).
In 2015, the HOA filed an action to foreclose its lien, and an Amended Summary Judgment of Foreclosure was entered in the state court action on September 7, 2016. Pursuant to the Amended Judgment, the sum of $12,289.10 was owed to the HOA on its Claim of Lien. (Complaint, Exhibit F).
On March 1, 2017, the Debtor filed a petition under Chapter 13 of the Bankruptcy Code. On her Schedule of assets, the Debtor listed the Property as her residence and claimed it as exempt. (Main Case, Docs. 4, 48, 71).
On May 9, 2017, the Bank filed a Proof of Claim in the Debtor's bankruptcy case. (Claim Number 3-1). The Bank's Claim Number 3-1 was filed as a secured claim in the amount of $199,662.06.
According to the tax records for Marion County, the market value of the Property for the 2016 tax year was $93,004.00. (Complaint, Exhibit G).
Discussion
In her Complaint and Motion for Summary Judgment, the Debtor asserts that the Property is encumbered by a "first priority" mortgage that exceeds the Property's value, and that there is no equity in the Property to secure the HOA's junior lien. In Count I of the Complaint, therefore, the Debtor seeks a determination that the HOA has no secured interest in the Property, that its lien is void, and that its claim should be treated as an unsecured claim under §506 of the Bankruptcy Code. (Complaint, pp. 7-8; Motion for Summary Judgment, pp. 4-5).
Courts have consistently held that a condominium or homeowners' association's junior lien on a debtor's residence may be stripped in a Chapter 13 case if the amount of a senior mortgage exceeds the value of the residence.
Recent decisions in the Middle District of Florida that have stripped an association's junior lien include In re Doyle, 2016 WL 6905929, at 1 (Bankr. M.D. Fla.)(citing In re Plummer, 484 B.R. 882, 890 (Bankr. M.D. Fla. 2013)("A condominium association lien, based upon a pre-petition assessment, which encumbers a debtor's principal residence can be stripped off in a Chapter 13 case where the amount of the first mortgage exceeds the value of the condominium."); In re Saint Hilaire, 2015 WL 3979071 (Bankr. M.D. Fla.)(The lien of a landowners association was determined to be wholly unsecured under §506, so that the association's lien on the debtor's residence was void pursuant to §506 and §1322 of the Bankruptcy Code.); and In re Buckner, 2013 WL 221993, at 3 (Bankr. M.D. Fla.)(Where the value of the debtor's residential property was less than the balance owed on a senior mortgage, an HOA lien for prepetition assessments was "a wholly underwater claim [that] may be treated as unsecured and stripped.").
In this case, the HOA's lien against the Debtor's Property is a wholly unsecured junior lien that may be stripped in the Debtor's Chapter 13 case.
First, the Debtor listed the Property on her schedules as her residence, and claimed the Property as exempt homestead. The claim of exemption was allowed, and the record indicates that the Property is the Debtor's primary residence.
Second, the Property is encumbered by a first mortgage that is senior in priority to the HOA's lien. In her Complaint and Motion for Summary Judgment, the Debtor asserted that the Property is encumbered by a "first priority lien." (Complaint, ¶¶14, 16; Motion for Summary Judgment, ¶¶ 6, 8). The first priority lien or mortgage was recorded in the public records of Marion County, Florida on September 8, 2006. The HOA's Claim of Lien was filed on July 27, 2011, almost five years after the prior mortgage was recorded. See In re Buckner, 2013 WL 221993 (Bankr. M.D. Fla.).
Third, the amount of the senior mortgage exceeds the value of the Property. The Bank filed Claim Number 3-1 in the Debtor's Chapter 13 case as a secured claim based on the Note and Mortgage dated September 6, 2006. According to Claim Number 3-1, the principal balance due on the mortgage was $120,999.30, and the total claim as of the petition date was $199,662.06.
The tax records for Marion County, Florida reflect that the market value of the Property for the 2016 tax year was $93,004.00. No conflicting evidence of value was presented, and the Debtor represented at the summary judgment hearing that the parties had "stipulated" to the value attributed to the Property by the Marion County Taxing Authority.
Based on this record, the Court determines that the amount of the senior mortgage exceeds the value of the Property. Consequently, the collateral underlying the HOA's lien lacks equity, and the HOA's junior lien is a wholly unsecured lien that may be stripped in the Debtor's bankruptcy case. See also In re Scantling, 754 F.3d 1323 (11th Cir. 2014).
Conclusion
The Debtor commenced this adversary proceeding by filing a Complaint against the HOA and Magnolia Garden Villas Association, Inc. In the Complaint, the Debtor primarily seeks to void the Defendants' liens against her residential real Property pursuant to §506 and §544 of the Bankruptcy Code.
Generally, a homeowners' association's lien against a debtor's principal residence can be stripped in a Chapter 13 case if the amount of a senior mortgage exceeds the value of the residential real property.
In this case, the Debtor claims certain Property located in Ocala, Florida as her residence. The Property is encumbered by a separate entity's "first priority" mortgage that exceeds the Property's value. Consequently, the HOA's junior lien is a wholly unsecured lien that may be stripped in the Debtor's Chapter 13 case pursuant to §506 and §1322 of the Bankruptcy Code.
At the summary judgment hearing, the parties agreed to accept and apply the Court's determination regarding the HOA's lien to both defendants in the adversary proceeding.
Additionally, because the Court determines that the HOA's lien may be stripped pursuant to §506 and §1322 of the Bankruptcy Code, it is not necessary at this time to address the Debtor's request to void the HOA's lien under §544 of the Bankruptcy Code, or the Debtor's request for a finding that the HOA violated the Fair Debt Collection Practices Act.
Accordingly:
IT IS ORDERED that:
1. The Plaintiff's Motion for Summary Judgment is granted as set forth in this Order, and Claim Number 1-1 of Woodland Villages Master Homeowners Association, Inc. shall be treated as an unsecured claim in this Chapter 13 case.
2. The lien asserted by Woodland Villages Master Homeowners Association, Inc. shall be deemed void and extinguished with respect to the property located at 2503 SE 18th Cir., Ocala, Florida, without further order of the Court, upon completion of payments under the Debtor's confirmed Chapter 13 Plan, pursuant to §506(a) and §1322(b) of the Bankruptcy Code.
3. A separate Summary Final Judgment, consistent with this Order, shall be entered in this adversary proceeding.
DATED this 21 day of February, 2018.
BY THE COURT
Paul M. Glenn
PAUL M. GLENN
United States Bankruptcy Judge